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Pricing Rainbow Options
A previous paper (West 2005) tackled the issue of calculating accurate uni-, bi- and trivariate normal probabilities. This has important applications in the pricing of multiasset options, e.g. rainbow options. In this paper, we derive the Black—Scholes prices of several styles of (multi-asset) rainbow options using change-of-numeraire machinery. Hedging issues and deviations from the Black-Scholes pricing model are also briefly considered.
Tue 12 Oct 2021
Valuation of American Call Options
The purpose of this paper is to provide an analytical solution for American call options assuming proportional dividends. Proportional dividends are more realistic for long-term options than absolute dividends and the formula does not have the flaws known from absolute dividend formulae.
Thu 5 Aug 2021
Option Pricing and the Dirichlet Problem
Laplace’s equation is ubiquitous in physics. Yet, despite the equation’s importance in physics, it has not been important so far in finance. In this article, Joshi will relate it to options’ pricing.
Mon 8 Feb 2021
Financial Option Prices in Excel
In this article, both Marcin and Jeremy discuss the use of algorithms from the NAG Library to calculate prices for financial options.
Fri 4 Apr 2014
